Managerial Economic - Assignment Example

College Managerial economic assignment There are a lot of economic factors that affect any Companys business and the outcomesof its operations, the factors may be within the control of the company whereas others may be beyond the control of the Company. Therefore we have both internal and external factors that influence decision making in any business. Thus it is upon the decision makers of any business to put into perspective these various factors from within and without that may influence their business in one way or another. To achieve this managers and other decision majors have some tools that have been developed by other people that they can apply to help them analyze these factors. Some of these tools include SWOT and PEST that provide good analysis to the factors that affect a business. Economic investigation involves an all-inclusive study of nationwide, regional, and global economic trends and performance, represents an exceedingly important phase in the development of strategy planned, set up, and rising businesses. Economic factors have straight impact on the possible attractiveness of a range of business ventures. Economic analysis results indications on various variables including shifts in nature of economy availability of credit, spending inclination of people, extent of disposable income, inflation rates, interest rates, deficits in the government, trends in gross domestic product, consumption predictions, joblessness trends, fluctuations in foreign currency, stock market patterns, shifts in demand of various products and services in diverse locations, trade in export and import, price indexes, fiscal policies, financial policies, and tax rates, in addition to economic policies of the rest of countries and regions such as the European Economic Community and COMESA (Gandhi, 2008, p. 1). The U.S and globe economies have been hit by extended severe distortions due to the recent worldwide recession. Consequently, businesses struggled and resorted to staff cutbacks, with a number of small, medium, and big businesses being forced by circumstances in the economy to close (Manalastas, 2009, p. 2). The U.S. housing collapse is a clear case of how unfavorable economic factors could topple huge businesses and enterprises. Many of displaced staffs are now being forced to become self-entrepreneurs to continue living, with the U.S. becoming further entrepreneurial day by day. This development strengthens the significance of analyzing economic factors that influence forces before and throughout the line of any business. External economic factors are factors from without the business and business don’t have control them. They include opportunities and threats that generate value or demolish value of the business. However they materialize from either the competitive alterations of the business/market or from demographic, political, economic, technical, legal, social or cultural factors. Changes in the external setting of business are related to customers, competitors, market patterns, partners, suppliers, social changes, new technology, economic environment and political and dictatorial environment. But in genera external factor can be categorized into four classes including political, economic, social and technological factors.  Political factors take care of policies and actions established by government bodies which influence the way through which businesses carry out every day activities. Legislation might impede an organization in a number of ways therefore it needs to be strongly examined during decision making. There are diverse levels at which political institutions forms including national, regional and international (Campell & Craig, 2005, p.141). Other concerns to be analyzed under the political setting are tax schemes and fiscal policy. In the current global economic recession many governments were forced to change their fiscal and monetary policies to check on many things dominant among them being inflation. Government and regions too adjusted their prices and taxation levels to deal with this problem. The recession greatly affected foreign trade especially exports and imports among countries and regions. Economical factors handle the issues relating to the economical setting that may affect the businesses tremendously. Main measures that require to be analyzed in this factor are the interest rates, inflation, Gross domestic power, exchange rates, Gross national Purchasing power, unemployment trends, wage as well as price controls (Campell & Craig, 2005, p.141). Businesses with the current global recession have being forces to controls their prices for instant due to the high fuel prices in the world and cut down their employees to reduces their operating cost among other measures. Social factors center mainly with people belief and attitudes and is directly linked to the demand and supply for the business (Campell & Craig, 2005, p.142). It too covers the extend of the market and possible targets to get into it. Demographic factors for instance skill and education, rates of birth, population growth and local population shifts, have a key role owing to the fact that they may assist in the add to of sales. Businesses need to be capable of place their market in appropriate areas in order to gain profit. The people saving power of people during the current recession in world fall drastically and also did their disposable income and spending power. Tight credit has been one of the measures by many people to survive the current economic recession. From the time the housing bubble began to loosen, credit card firms fro instance have been lessening credit limits and, in some instances adding up interest rates, partially as they fear more clients will fail to pay as financial strain spreads and this has continued and is continuing to happen up to now. That means citizens who have credit cards with considerable rates ought to hold onto them, since they might not get a better deal elsewhere. This by itself is a threat to the new upcoming credit card firms that are seeking to get into the industry (Palmer, Pethokoukis, & Mullins, 2008, p. 1). Technological factors on the other hand take care of the rate of technological advancement in the specific industry and the rest of the world. With the fast changes in technology, it is obligatory for businesses to seek into the up-and-coming technology in the market in order to adjust to the technological change. The utilization of technology in businesses helps in many ways including reduction of costs and enhanced productivity. Many companies in the recent global recession have been looking into ways to cut down their costs and all increase their productivity and as discussed earlier technological advancement is one of the ways. For instance due to the sky rocketed fuel prices many managers have been forced to look into technology that is less fuel hungry and also into ways which they can generate their own energy to supplement the high priced energy. All this changed much the normal way in which the managers made their decisions. The reality is that, the world has been going through the worst global financial crisis from the time when we had the Great Depression. Starting off in USA, economic recession is influencing all the key players of economy of the world (Manalastas, 2009, p. 1). Governments and key policy makers in the economy of the world have taken note of the urgency of the state of affairs and hysterical steps have been undertaken to stop the rot. At the center of the word recession, spirals of numerous financial faults are intermingled. Therefore managers must make informed and appropriate decisions to avoid being entangled in this matrix of problems. The major problem with economic mayhem is; it generates fear and panics amid all people in the world especially the businessmen. Rumors are molded and they fly, ensuing into still more fear amongst the common people about their savings and tough earned income. Economic problem in the world recently is of gigantic proportions and is affecting all the people ranging from how households do their shopping through the decisions made by the gigantic International Corporations to the formulation of policies by the government (Tarabay & Eigbire, 2009, p. 1). It is the duty of the manager to make sure that the financial part of the operation is in shape for purpose of encountering the recent world economic recession. They ought to monitor the business’s probable cash inflows and outflows appropriately. Regularly rolling cash reports ought to be produced perhaps weekly or monthly be certain that everything is gong on appropriately. The available cash in the business must be centralized or collective across sections. Managers cant be sure of making sense of financial essentials without these undemanding checks; they assist them to both avoid traps and offer opportunities for generating profit for the business. Routines and values should be altered so the entire company has the plan of reducing waste and exploiting all efficiencies that avail them at all times. Even outstanding organization wont offer a bright future except crisis management engrosses every manager going past his or her every day duty. In periods of mayhem, opportunities proliferate. Nevertheless taking advantage of them will need rapid reflexes, an aggressive approach, and severe changes to the status quo (Haller, 2009 p1). For instance John Opel the former CEO of IBM for aggressively rolled out the initial PC in the time of the1981 recession. Actually, the PC was badly under-budgeted, and IBM got a flood of orders that it couldnt handle. Supplying the fundamental aggression was a devoted team of managers and foremen seconded to the venture, and given just over a year to capture the PC market. Throughout this, the second-worst of all current economic mayhems, if an organization announces lay-offs and closing, much of the liability is routinely attached to the recession in the world. Nonetheless, a part of blame ought to also be linked to management itself (Haller, 2009 p1). Managers have to inquire about themselves on a number of difficult queries. How and the reasons as to why the bad management decisions taken that led to the recession in the world? Why were faults and faulty attitudes of the past ignored? And ultimately what can be used to guarantee that accurate management decisions are pursued, despite of the economic climate? The recent world economic recession has with it threats and opportunities for business and its the duty of the managers to look into these external factors appropriately to make sure they avoid those to be avoided and also take advantage of those that can generate some extra profit for their companies. Thus it is the duty of the manger to come up with the proper mechanisms and strategies for their companies to ensure that they survive the current world economic recession. This has made many decision makers change their strategy and also their long term plans in order to fit well in the current state of things. Bibliography Tarabay, R & Eigbire, R. (2009) To Invest Or Not Invest?: Factors affecting IT investment decisions Available from: http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-9638 [accesses November 19, 2009] Campbell, D. & Craig, T (2005). Organizations and the Business Environment. Ed. 2, Butterworth-Heinemann. Gandhi, J. (2008, October 19). Global Recession – Causes. Available from: http://ezinearticles.com/?Global-­Recession-­-­-­Causes&id=1597698 [accesses November19, 2009] Palmer, K. Pethokoukis, J & Mullins, L. (December, 2008). Your 2009 Recession Survival Guide: Heres how to weather the downturn and take advantage of the tough times in 2009. Available from:http://www.usnews.com/money/personal-finance/articles/2008/12/02/your-2009-recession-survival-guide.html [accesses November 19, 2009] Haller, R. (February, 2009). Bad management decisions and the recession. Available from: http://ww.management-issues.com/2009/2/19/opinion/bad-management-decisions-and-the-recession.asp [accesses November 19, 2009] Manalastas, R. C. (September, 2009). External Factors in Business Affecting Success. Available from: http://www.associatedcontent.com/article/2155491/external_factors_in_business affecting_pg2.html [accesses November 19, 2009] Read More